Oil jumps nearly 3% on US crude draw, fading Brexit fears

NEW YORK: Oil prices jumped nearly 3 percent on Wednesday after the U.S. government reported a larger-than-expected weekly drawdown in crude inventories, adding fuel to an existing rally on fading concerns over Britain's exit from the European Union.

The potential for an oil workers strike in Norway and a crisis in Venezuela's energy sector also added support to crude futures.

The U.S. Energy Information Administration said crude stockpiles fell 4.1 million barrels in the week to June 24, the sixth consecutive week of drawdowns.

That was more than the 2.4 million barrels expected by analysts in a Reuters poll. The American Petroleum Institute trade group reported a 3.9 million-barrel drawdown late Tuesday, boosting crude futures in post-settlement trade.

"The report is bullish with the large crude oil inventory decrease of over 4 million barrels," said John Kilduff, partner at New York energy hedge fund Again Capital. "The stepped-up demand by refiners and a plunge in imports helped create the decline."

Brent crude futures were up $1.29, or 2.7 percent, at $49.86 per barrel by 12:00 p.m. EDT (1600 GMT).

It was a second straight day of gains for Brent and WTI, which have risen about 5 percent each since Monday's settlement, paring some of the 8 percent lost in the previous two sessions after the Brexit vote.

Heating oil futures, also known as ultralow sulfur diesel, rose 3.4 percent, leading the oil complex, after a 1.8 million barrels decline in stockpiles of distillates, which include ULSD. Analysts had expected 14,000-barrel build instead.

Despite that, some traders were bearish on their longer-term view of oil as the EIA also reported an unseasonably large rise of 1.4 million barrels in gasoline versus analysts' expectations for a 58,000-barrel draw.

On the East Coast, gasoline stockpiles rose to record levels.

"I am still unimpressed with overall crude draws for June," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina. "With 16.7 million barrels per day of crude runs and production declines, we should have larger drawdowns for Q2. That has simply not happened."

Tariq Zahir, crude spreads trader and managing partner at Tyche Capital Advisors in New York, had a similar view.

"We firmly feel any rally will stall out near the $50 level, as we have seen unjustified gains in previous weeks for gasoline based on the build number we have now," Zahir said.

“To save the environment and to fight climate change, my government has planned a major campaign. By 2022, we want to generate 175 GW of renewable energy. In the last three years, we have already achieved 60 GW or around one-third of this target,” he said.